Tuesday, January 28, 2003

On Life Matters on Monday I explained that a carton of Peter Jackson Extra Mild (10 x 25) costs $60.65 retail, but only $33.50 at a duty free store. Australians can only access duty free stores if they have a ticket to travel overseas. The top 20 per cent of income earners in Australia spend five times as much on overseas travel tickets as do the bottom 20 per cent.

The Australia Institute has published an analysis of the duty-free system in Australia entitled Tax Flight from which I drew heavily. I also quoted from a long forgotten Industries Assistance Commission report on Passenger Concessions released in 1985 and not available on the internet.

The whole idea of duty free started because of enormously high tariffs in Australia. Locals didn't mind paying them (they didn't know any better) but the few Australians who did travel overseas at the time could see what was happening and so were 'bought off' by being permitted to bring in a certain amount of overseas goods "duty free", a privilege not available to other Australians.

Logic dictated that if our jetsetters were able to buy duty free overseas they should also be able to buy duty free in Australia, so DF shops were set up at airports.

Then in 1972 a group of would be downtown DF stores took their case to the High Court and won the right to operate DF stores outside of airports. The number of DF shops in Australia exploded from four (in 1972) to 50 at present.

Helping along the way in the mid-eighties was a Labor Party election promise to allow "inward duty free" stores at airports to sell booze and fags to Australians upon their return. The Industries Assistance Commission pleaded with the government not to do it finding that "Inward duty free shopping does not assist the achievement of any of the objectives of passenger concessions."

It foresaw another High Court case using the same arguments as the earlier one to extend inward duty free shopping downtown.

On Life Matters I imagined it working like this: "You've just returned from overseas and you still haven't bought your carton of Peter Jackson, please come in and do it next time you're in town."

It would, I said highlight the absurdity of what happens at the moment.

Tariffs are now low, down to five per cent, and sales tax, once 30 per cent wholesale for electrical goods, is now also low (the 10 per cent GST). The original rationale for duty free stores no longer applies, if it ever did.

The only big savings to be made are on alcohol and tobacco, they are subsidy to the well-off costing upwards of $300,000 a year, and as I said on Life Matters, we may not like the rich, but do we have to kill them?